Marketers to spend $8 billion on PR by 2013

NEW YORK: Spending on PR will top $8 billion in the next three years, a hefty 55% increase over 2008 expenditures, according to the annual Veronis Suhler Stevenson (VSS) forecast.

NEW YORK: Spending on PR will top $8 billion in the next three years, a hefty 55% increase over 2008 expenditures, according to the annual Communications Industry Forecast by private equity firm Veronis Suhler Stevenson (VSS).

The $8 billion figure – recently cited in an Economist article on the vitality of the industry – contains $3 billion that will be spent on word-of-mouth marketing, which includes social media outreach as well as offline brand ambassador programs. Jim Rutherfurd, EVP and managing director at VSS, attributed the forecasted growth in part to a more complex media landscape.

“With a 24-hour news cycle, different outlets and formats including online, companies need more advice around PR than they did in the past,” said Rutherfurd. “Businesses also continue to understand the value of having their message validated by a third party, even if they know they can't entirely control that message.”

Demand for PR held up well during the economic downturn, driven largely by word-of-mouth marketing as brands incorporated social media into their efforts. In 2008, spend on PR and word of mouth increased by 7%—to $5.2 billion—versus the prior year. (Word of mouth accounted for much of that growth—14%, versus 4% for traditional PR.) “The growth of traditional PR did slow down in the period from 2003-2008, but relative to other mediums that actually saw declines, it performed pretty well,” Rutherfurd said. “The economy may have been in a downturn, but even companies in bankruptcy protection had to communicate to their stakeholders.”

Greater investment in PR, as well as other mediums like event marketing and online media, has come at the expense of traditional advertising. Over the last two years, advertising retracted by 11%. In 2008, advertising represented the smallest share—at 24%—of the four major communication segments, the first time that has happened since the study began in 1986. Companies spent $210 billion on advertising in 2008, behind $215 billion on “consumer end user” (videogames, newspaper and magazine subscriptions, etc.), $216 on “marketing services” (PR, direct marketing, etc.), and $241 billion on “institutional end user” (Internet and wireless, tradeshows, etc.).

“Advertising is very expensive, and in tough times, companies demand greater ROI. Traditional advertising is not as measurable as the Internet or other forms of marketing communications,” Rutherfurd said. “It is also part of a trend that started long ago that has seen companies move from mass media to more targeted communications.”

And that trend is expected to continue. From 2008 to 2013, VSS forecasts that traditional advertising will decline by another 3%.

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